Entrepreneurship

Why do market research?

It’s impossible to sell people what they don’t want. That’s obvious. Just as obvious is the fact that nothing could be simpler than selling people what they do want. Market research is essential in helping you find out what people want. Market research provides what you need to get sound information about your product, service or market so you can develop good marketing and business strategies.

Who should do market research?

All businesses, big and small, old and new, need to do market research. A common feeling of many small business owners is that they don’t need to do market research as they already have a feel for their customer market, given their long experience. However, experience, though useful, can lead to a false sense of knowing. Be careful as information gathered randomly over the years may be out of date, vague, biased or of a folk tale nature. Business owners can’t afford to make errors in judgment. Their savings, their family’s future and their business reputations are at stake. Market research is a critical step.

When should I do market research?

Market research is not a one-time only activity It needs to be done on an ongoing basis and whenever a major business decision needs to be made. It usually needs to be done:

Ø before starting a new business
Ø when introducing a new product or service
Ø to maintain your existing business

Before starting a new business

Innovative ideas and gut feelings aren’t enough when it comes to predicting success for a product or service. Just because your friends and relatives rave about the great parties you throw, doesn’t necessarily mean your party planning and catering business will be an overwhelming success. Up front, you need to know:

Is there a need for this service?
Who is likely to buy your service?
Are there enough of these people in your market area?
How are you going to find these customers?
Is a competitor meeting the need? If so, can you offer something they can’t?
How much are these people willing to pay?
Will finding customers cost more than the profit margin allows?
Is there a profit margin?

How to do market research?

It’s to your advantage to do at least some of your own market research. The more you do, the less money you’ll pay to consultants and the more insight you will have regarding your product/service and market. Start by doing some indirect market research. Gather information that is already done and available to you at little or no cost. Existing businesses can look at their records and talk to employees. All businesses are well advised to read government reports, industry magazines, trade association surveys and other documents. Be sure to talk to people directly and indirectly involved in the industry. Check to see what your competition is doing. You may then find you need to do some direct market research. In other words, generate some information yourself. It might include such things as conducting a test of your new product, doing a telephone survey, or observing the numbers and types of people who shop at a local business. This type of market research, since it is often more complicated than indirect market research, can benefit from the expertise of a
market research professional. This doesn’t necessarily mean turning the entire research project over to a consultant. Rather, it may mean the consultant does some work (e.g., develop a questionnaire) and you do some work (e.g., conduct a test of your product and have consumers complete the questionnaire). So, although there is a need for specialists and consultants, they aren’t needed to solve every problem. With additional reading on the subject, even those with no formal market research training can take an active role in conducting their own market research.

The eight steps of market research

As with any business activity, your market research should be carefully planned, written down and carried out. If your business is already up and running, you probably do market research every day in your routine management activities without even realizing it. Market research simply makes the process more orderly and ensures no bias. The eight steps of market research are:

Step 1
State the situation you are facing.

Step 2
Clearly define your product or service.

Step 3
State the objective(s) of your market research. What do you need to find out? Think about what decisions you want to make from the information you will get. An objective may be identifying or verifying a target market, identifying or verifying customer needs and wants, finding new opportunities and new markets, or estimating the size of markets. A well-written objective is clear, concise, complete, realistic and commercially worthwhile.

Step 4
Look at the information you already have. Research may simply mean organizing and analyzing existing information.

Step 5
Collect additional information if needed. Begin by doing some indirect market research. Find information that is already available such as government papers or studies. which look at peoples habits.

Step 6
Organize and analyze the information collected. Make sure your research answers the questions who, what, where, when and why, so you don’t jump to conclusions. Is there anything else you need to know? Who is your competition?

Step 7
Make decisions based on what you have learned.

Step 8
Watch the results of your decision and learn from them.